Good afternoon and welcome to today's Insight event. I am Andrew Mooney, the Corporate Development Director for Bunzl. Together with my colleagues Alberto, Oscar, and Nicholas, our objective today is to provide you with an understanding of why we excel at delivering value through acquisitions and what makes Bunzl the preferred acquirer for family businesses. I will start with a short presentation on how our acquisition strategy and how our model works. This will be followed by two videos. The first, focused on Spain, will give you an in-depth view of our consolidation strategy. The second will give you direct thoughts from some of our entrepreneur sellers. We will then have time for a Q&A session. Acquisitions have always been part of the Bunzl growth story, with over 230 deals since 2004 and GBP 6 billion of committed spend.
Acquisitions are at the very heart of our business, and everyone in Bunzl is encouraged to look for the next opportunity. Our large and fragmented markets, coupled with strong cash generation, make the compounding model a terrific way for us to invest and grow. The general stickiness of customer relationships also helps. Customers fear the disruption a change of supply may bring. This makes growth through acquisition an attractive route for us. Bunzl is now GBP 12 billion in revenue, spans 32 countries, and operates in six sectors, with our acquisition strategy having delivered two-thirds of our group revenue growth over the last 10 years. As an example of how we have grown and developed in a market, I would like to highlight one that is close to my heart. I joined Bunzl in 2000 through the acquisition of its first safety business, Greenham, in the U.K.
Since then, through more than 50 acquisitions, we have built a safety sector with a footprint spanning 27 countries and revenue close to GBP 2 billion. We have invested in sector expertise and are now one of the largest safety distributors in the world, providing our customers with essential products plus valuable support and advice on a range of regulations and challenges they face. We are now a significant player in the safety market, but we still have a long way to go. The market remains fragmented, and our share is a low single-digit percentage. Our expansion in the higher margin safety sector has not only brought growth in a new market but has allowed us to leverage brands, especially own brands, and increase our level of value-added services along with the distribution of product.
This example of the safety sector is not unique, and we see significant opportunity across other areas. I frequently say to sellers, we cannot guarantee that Bunzl will make you the highest offer, but what we can promise you is Bunzl will be a great home for your business and your people. These are not just words, they are a reality. We offer decentralized environments where commercial autonomy is assured, and entrepreneurs are encouraged to remain agile and to continue growing their businesses. What does Bunzl bring along to the party? Family businesses are really good at everything, and utilizing our scale and expertise, we can enhance performance through areas like operational support, such as implementing a warehouse management system or even an ERP, planning and managing a move to a warehouse to facilitate expansion, deal expertise to assist entrepreneurs who have developed their own pipeline of acquisition opportunities.
These are things we are doing all the time, but for a family business, they can be somewhat daunting and a major hurdle to future growth. In addition, being part of a group enables targets to benefit from synergies, and the most accessible of these relate to purchasing scale. For those acquisition targets that buy in the Far East, our Asia sourcing function is a real benefit. It not only assists them in finding products at the right price, but aids them considerably in quality assurance and ensuring factory audit compliance. Did I mention the advantages of our decentralized model? Sellers only realize how respectful we are of what they have built once they've joined the group.
They often have in their minds stories of family businesses being swallowed up by large corporates, and to help them understand the Bunzl reality, I often need to enlist the help of previous sellers who are happy to share their experiences. One of the questions I am most frequently asked is, can Bunzl maintain its acquisition momentum? The answer is simple: it's a definitive yes. Each one of our countries where we have a presence in a sector has a dot. There are nearly as many spaces as there are dots, but what is also important is that the dots only represent a presence in a sector, and in many of our sectors, there is huge potential to grow. If I take Italy, for example, we have a small dot for safety.
It is a relatively small business, and if you compare Italy in terms of market penetration to the U.K., based on population, there is a GBP 1 billion opportunity alone. In addition, there are also countries where we do not have a presence yet, places like Sweden and Greece, which also represent significant avenues for expansion. What does that mean in terms of opportunity for the group? The size of our opportunity within a country or sector is not easy to assess and can depend on several features, including population size, economic maturity, and legislation. Based on revenue to GDP, if we take our U.K. and Ireland business as a base and use its market penetration, then bringing the rest of our existing markets to that level, it would mean Bunzl doubling its size.
A somewhat more dramatic statistic is if you take our Danish business, which operates in only four out of our six sectors, then using population as a base measurement, Bunzl could be five times the size. Bear in mind these statistics are based on our existing footprint, excluding China. Today, we have more than 1,300 potential targets identified in our deal management software. Our pipeline is active, and you'll have seen the good momentum we have delivered in recent years, with our average annual committed spend double what it was in the years prior to the pandemic. The average deal size over the last five years has been around GBP 40 million, with a focus on bolt-on opportunities supplemented by less frequent larger deals. What we also find is that success breeds success.
Each of our regions will have specific areas of expertise developed over time, and we will have often started with a platform deal and then increased scale through smaller bolt-on opportunities. When we think about opportunities, each of our countries and sectors have specific areas of interest. If we take our North America safety business, for example, we have seen very good momentum developing this area over recent years and have established a strong presence in hand protection. When we look at this market, whilst we see potential to further expand in gloves, there is also significant opportunity outside of this in other PPE products. For example, workwear, footwear, respiratory, I could go on. Outside of PPE, but within the safety sector, there are further areas to explore, such as asset protection. A great example of developing safety in the US has been MCR.
Bought in 2020, we quickly realized the strength of the management team and their capacity for taking on acquisition growth. In 2021, we acquired a safety business called Tingley Boots, which was successfully bolted into MCR. More recently, we have acquired Gisa, a Mexican glove business, which greatly enhances MCR's scale and reach in Mexico and across North America, and I'm sure there are more to come in the future. Let's talk a little now about deal origination. This is where Bunzl's secret sauce starts to come into play. Acquisitions are truly in our DNA, and everyone who works in Bunzl is motivated to think about the next opportunity, the next deal. This entrepreneurial mindset is encouraged in all of our employees, from drivers and warehouse staff to our sales teams and Senior Management. We estimate that at least 75% of our deals come through internal contacts.
Our local management takes time to have a coffee every now and then with future prospects, telling them what life in Bunzl is like and always reinforcing the message of a decentralized and entrepreneurial culture. Deal origination is key, but so is execution discipline. This is where a central team experienced in transaction execution is absolutely key, and I am lucky enough to have a great Corporate Development team, eight people each loosely aligned with a geographic area. This flexible alignment means they build great working relationships with our local management but are flexible enough to support in other areas as deal flow requires. The Corporate Development team is strongly supported by a central legal team who partner us on every deal and who utilize local legal expertise where necessary.
Our methodology focuses on what we know is key to our success and on the specific risk areas for individual deals. We are constantly learning and adapting our approach and always negotiate robust transaction documents that we believe are best in class. Lastly, onboarding and delivery. This is where the hard work starts, and the transaction team hands back to local management, who will have taken a back seat during the diligence process. Local management will have been kept updated and consulted throughout, but they are not in control or directly involved in deal negotiations. Onboarding requires respect, respect for the target's employees and customers, and reassuring both of them that it will be business as usual.
We always start with a joint presentation to employees, finishing with a Q&A explaining what being part of Bunzl really means and what the benefit of being part of a larger group might be. What we work on first, and this will have been made clear to the sellers beforehand, is controls and reporting. Many of the businesses we acquire take weeks to prepare monthly accounts, if they prepare them at all. We show them how to do it in seven days, and we often install a financial controller to help do this. Next, where relevant, comes realizing those purchasing synergies through the matching of prices and supply negotiations. Another quick win can be on freight, where we obviously have the benefit of scale compared to any acquired business. We also start looking at the working capital opportunities, as owner-managers have often overinvested in stock and tied up their cash.
Our disciplined approach filters out many opportunities that don't quite feel right, and often we back away respectfully if a target is not a good fit or the time is not right. The early courtship phase may last anything from six months to 10 years. We play the long game. A great example of this is one of our deals completed earlier this year, where we got close on two previous occasions, finally signing the deal some nine years after our first meeting. An important filter for us is the approval of our Executive Committee. This happens at least twice during a process, once before an offer is made and then before the deal is signed. In most cases, however, inevitable issues arise along the way, and that will require extra input or guidance from the Executive Committee.
Over the last five years, Exco have reviewed around 280 businesses, of which 70 resulted in signed deals. This speaks to the rigor of the review process. In addition to Exco, the board also reviews and approves large deals. I also present to the board each year on acquisitions. I present on the completed acquisitions two years previously, with an assessment of actual performance against the acquisition case, together with an analysis of our return on investment. Obviously, at a local level, the performance of any new acquisition is constantly measured from day one. I would now like to take a deeper dive into our selection process for deals. We use a nine-point template to evaluate a business. This template includes characteristics as basic as, is it a B2B goods, not for resale business?
More detailed ones like how fragmented is the customer base, how strong are customer relationships, and what is the real value proposition? What does the competitive landscape look like, and is there the ability to consolidate further? Two factors are especially important, though. The first is attractive financials. The business should be growing and operating with good profit margins, plus delivering a good return on capital employed. The other fundamental factor is less tangible, but possibly even more important, and that is a strong management team. We want a team that will stay with the business that is a good cultural fit. We will obviously support and develop them going forward, but we are never looking to put our own team into a new acquisition.
As we move through a process, the critical evaluation does not stop, and during diligence, there are many, many reasons a deal may lose momentum or fail. Some issues can be insurmountable, making a deal impossible, while others can be addressable where a pause is required so we can revisit at a later time. Issues can be down to financial due diligence findings, which create a valuation difference. Also, our view of a target's management capabilities can evolve and make us rethink our plan. To put some numbers around our selection and filtering process, we analyzed our deal flow in Spain over the last six years. Our teams, both locally and centrally, met with over 100 different companies. 45 of these signed NDAs. This enabled us to make a deeper review. Exco approval was given for 22 offers, which finally resulted in 10 deals.
As you can see, the attrition rate is quite high, and one of the reasons for our success is due to the number of deals we don't do. There is no pressure to complete a deal, and nobody is incentivized on deal volumes. It's all about getting it right. I will wrap up by talking a little about our valuations and how we consider returns. All our deals are compared to a project WACC. This is broadly equal to the country's specific cost of capital. We look at the return on invested capital, or ROIC, for a deal, and we expect it to achieve the project WACC in year two or three. Whilst this is the case, on average, our deals surpass project WACC in the first year. Deal multiples obviously get talked about quite a lot and at times get influenced by the level of M&A in the market.
Also, larger deals generally attract more direct PE attention and therefore carry a higher multiple. I explained earlier our disciplined approach to execution. This discipline equally applies to valuation. Let me back that statement up with some numbers. Over the last 10 years, we have completed 112 deals with nearly GBP 4 billion of committed spend. Ignoring the four largest deals during that period, our average acquisition multiple at 8 times is almost exactly the same for the first five years as the second. Alternatively stated, this is a ROIC of 12%- 13% on acquisition. One thing that has changed over the last 10 years, though, is the volume of deals where we invite management sellers to retain a minority share, typically for three to five years.
This has a real benefit in making our offers more appealing when compared to deal structures used by private equity and incentivizes the medium to long-term performance. That concludes the first part of today's event, and I hope I have managed to explain some of the reasons why we are so successful at M&A and how we have managed to build a market-leading approach to growing our businesses through disciplined acquisitions. Now to the first of our two videos, which brings to life our consolidation strategy in the Spanish market.
Welcome, everyone. My name is Oscar Gonzalez. We're here today in the newly opened distribution center in the city of Málaga, one of our three main distribution centers in Spain. We chose this location because it's a great example of how we have combined sustainable organic growth with strategic acquisitions to shape how Bunzl does business in the country, allowing us to be close to our clients and serve businesses locally. With me today, I have Alberto Grau, who is the Managing Director of Bunzl Continental Europe, and Iker Yeregui, part of the selling family of Irudek and now part of the management team of Bunzl locally. Alberto, you've been with Bunzl for many years. Please, can you tell us your Bunzl journey and how acquisitions have been important for you?
I joined Bunzl in 2008, attracted by the decentralized organization and the long-term mindset. Oscar, Spain has been a standout, growing from a small business of GBP 8 million, our first acquisition in Spain back in 2007, up to GBP 460 million today across several sectors, driven by 20 acquisitions, also by significant organic growth. Seven years ago, I moved to Amsterdam to lead Continental Europe. From my position, I've been continuously supporting the acquisition strategy across the area. During this period, we have acquired 28 businesses, by the way, one-third of which are in Spain.
I've been really active in Spain as well. We've looked at about 10 deals together. The impressive thing that I think about Spain as a history of acquisitions is that we've been able to buy across very different market segments for Bunzl. We've done the strategy to keep growing Bunzl distribution in Spain geographically. We bought small bolt-on businesses to keep adding to this service for our clients. We've done the strategy to get new capabilities, like the digital services we have in Spain. We've also made the conscious decision to acquire new products with specialized capabilities. In most cases, we bought family-owned businesses to sell their business to us. Alberto, what do you think makes Spain such a fertile ground for M&A?
First, Spain's economy has been mainly driven by small to mid-market family-owned businesses. This fragmentation creates a great opportunity for consolidation, in particular in our core market sector. Second, our local management team has been very active, historically has been very active, building strong pipelines, developing trustful and long-term relationships with potential targets, which ultimately turn into successful acquisitions.
One thing I'm sure our investors are keen to know more about is how do we continue to find good targets consistently?
We rely on the market intelligence developed by our local teams. They are close to the market, in constant contact with players, and help us build strong pipelines. When we approach the targets, we assess the willingness to sell, we also explore the quality of the management, position in the market, potential to grow, and cultural fit. We do this constantly over the years, sometimes decades, and we stay disciplined in saying no if some of these factors are not there. Sometimes targets are coming from Corporate Development.
It's a good point. Sometimes advisors contact us directly, and that is what would be different. When they contact us and the corporate development team, usually the business comes with a sales advisor that has advised the family to sell. If the sales advisor is doing their job correctly, it means it has identified us as a potential buyer, and that's where we start. The process is absolutely the same. We follow the same process and tick the same boxes. In the end, we just know that this is a business that is more ready to sell than when we approach it directly. It is most likely a business that we have identified already in what you just described. Iker, from your perspective as a seller, how did you experience the Bunzl process?
Everything happened more or less seven to eight years ago when a friend of my father and also part of the management team of Bunzl approached my father and talked about a bit the strategy, the centralized strategy of Bunzl. It is true that some private equities came to us in the first point some years ago, but we always kept Bunzl in the loop. We joined the Bunzl family in 2023 due to the decentralized strategy and also that they wanted us as a family to keep in the management.
Was it a good decision?
I think it is, Oscar. Being part of Bunzl, we took some information that it wouldn't be possible without Bunzl. For example, like digital transformation, like health and safety, those departments, we wouldn't be able to make it go well without the help of Bunzl.
Alberto, what made Irudek stand out for you?
Irudek is a clear example of a business that ticks all the points we look for: strong cultural fit, growth potential, well-positioned niche business, solid profitability, and excellent management team. Now, after almost three years from the acquisition, I would say that this assessment was spot on because today the business has delivered strong organic growth.
Alberto, what does the centralized strategy mean for you?
In Bunzl, local managers are the owners of their destiny in the sense that they develop and execute their own business strategy. Why? Because they are closer to the customer, they know their needs, they know how to react fast to market changes while benefiting from the global scale and structure of Bunzl. Oscar, what makes Bunzl so good at executing M&A transactions?
We have a fully dedicated corporate development team that speaks six languages across several nations that partners with our local business managers. That way, we can have a professional solution also tailored with local knowledge. We have a team that has global reach doing deals across multiple countries that we're able to know where the trends of our industry are going. At the same time, we partner locally so we can understand the local trends and why each geography has different ways of doing business. Lastly, given a number of deals we've done with family-owned businesses, we really understand family-led businesses, organizations, and how they make their decision. One thing that we've discovered that is really important for family owners is, first and most importantly, to build trust.
Second, that we are a good home for their business, but also never to lose the idea that they want to protect their legacy going forward. If we combine these things together, I think it allows us to be constant in delivering good acquisitions throughout the years. Alberto, where do you draw the line between what is a central responsibility and a local responsibility when it comes to acquisitions?
First, deal generation is mainly originated locally, thanks to the relationship we have with potential targets in every market. The negotiation process is led centrally, and during the due diligence, we support the central team through our local finance teams. Finally, the integration planning is developed and executed locally, and a coordinated communication strategy is put in place to manage stakeholders' alignment.
Yeah, so it's really the Central and local teams working together to deliver this.
Yes.
We are also very disciplined in our valuation approach. We need to make sure we balance the company's track record with the company's future potential within Bunzl in order to be able to pay a fair price for the business. Iker, what is next for you?
Next step, Oscar, first, my father needs to get retired. The idea is that after my father gets retired, my brother and me, we are going to get into the management. The idea for the brand as Irudek is to make the brand well-known everywhere in the world and be the number one food protection company in the world.
Alberto, what's next for Spain and beyond?
Spain is an example of how we can grow inorganically in many countries, replicating the model. We continue to find family-owned businesses that are a good fit for us, and we have the strategy to keep consolidating the fragmented markets in which we operate. Looking forward, in a broader context, Continental Europe remains one of the biggest areas for acquisition growth. Oscar, you know that we have a promising pipeline. Bunzl's success is built on relationships and people. Acquisitions are no different. We have a dedicated team, proven track record, disciplined approach, but most importantly, it is in our DNA, not just mine, but across the 27,000 Bunzl employees, to constantly be on the lookout for great business to join our family.
Alberto, thank you very much for your words today. Iker, thank you for joining us, and thank you for joining us today in this insight into our M&A journey.
What a great video, and thank you to the team for taking the time to prepare it. Next, we're going to hear from entrepreneurs who have sold their businesses to Bunzl. First, I would like to share with you the words of Andrew Nisbet, who sold his business to us last year. Preserving our culture was always a top priority. Bunzl made it clear they shared our values, respected what we had built, and trusted our team. Their culture felt closely aligned with ours, which gave us real reassurance that the legacy of the business would be carried forward in the right hands. Bunzl were open, respectful, and clear about their intentions right from the start. They played everything with a very straight bat, which made it easy to trust that the business and our people would be well looked after.
This is a great summary of what typically matters to our sellers, and our next video will provide more insight on this from three others.
My name is Alastair McLaughlin, MD for Bunzl Ireland. Today, Bunzl Ireland comprises six operating companies, and we employ 502 staff across Ireland. I joined our family business, Thomas McLaughlin Ltd, from college in 1983. Initially, to put a computer in, I was meant to go back to college, but that never happened. In 2000, Bunzl approached us. The deal took about two years. It was very important to us that whoever bought our business was absolutely going to look after our loyal staff and equally that they were going to look after our customers. Through the negotiations with Bunzl, it was interesting, certainly, to understand the strategic ambition for the growth in Ireland. They had ambitious plans, and we could see us being a part of that. I found the whole process very straightforward. We were a structured, tight, profitable, well-run business, so reporting for us wasn't an issue.
Bunzl acted exactly as we agreed in terms of how Bunzl has helped to develop our business. I've certainly been able to tap into the global skill on the purchasing side, access to training courses and people development that has been really strong, access to funds for capital expenditure, and to tap into the experience of the acquisition team that had been really tremendous and there's a lot of skill and talent in that team that has been very useful. We have a clear plan for the sectors and markets where we want to develop. In terms of discussions and attracting people, Bunzl have here a very good reputation. We're a well-respected business, well-respected employer. It's about looking after customers and us making sure that we give first-class service.
Hello all, my name is Minna Åman-Toivio. I'm a founder of Medkit Finland, which was founded in 2008, and we merged with Panmark in 2021. Since that, I have been the CEO and the main owner with my family in Panmark. We sell daily consumables for the medical side, nursing side, Horeca side, cleaning, and hygiene. Finland is country number 32 for Bunzl, which means that we were the first acquisition in Finland, meaning that we were the anchor acquisition, meaning platform for the growth. We have to trust the partner we choose. Bunzl is the best partner for my future, for our business, and most important for my staff members. We got the first contact from Bunzl M&A team. They came to visit Finland and Panmark, and the conversation starts. It took about three years because we are business owners.
We have to find the right future home for our business that we can continue as we have planned. Also, on the other side, we didn't want to take benefits out of Bunzl as well, so we needed a future for the growth. Being one and a half years now with Bunzl, it has been a learning curve. All the quality processes, IT, everything has been improved. Our staff members have been very amazed. People have been very supportive to us. They are happy to come and visit Finland. We have had several audits coming from our customer sides, which shows us that our quality level in every segment has improved. In Finland, we see lots of opportunities for the future, maybe also in Sweden. In Finland, we have internally found 32 acquisition targets ourselves.
Together with the London team, we see that there's a lot of business opportunities for the growth. What can Bamark and Finland bring Bunzl? It can bring some energy, Northern Lights, snow, guts, and female energy, of course. It can show that the future is very bright.
I'm Sam Monte. I've been working here at Monte almost my entire life. Towards the end of the year here, going to step into the General Manager role to lead our overall business here at Monte Package Company, taking over for my father, who has been running our business, growing our business for the past 40 years or so. Our business was started here in Riverside, Michigan, in 1925 by my great-grandfather. Over the last 100 years, our company has grown and covered the entire Eastern U.S., selling agricultural packaging, harvesting equipment, growing supplies to growers and packers all throughout the produce industry. In 2018, our family decided to sell our business to Bunzl. We were very comfortable with the fact that there was a very family-oriented culture within the Bunzl team.
Some of the people that we talked to through the acquisition process, a lot of those people were people that had sold their businesses to Bunzl. They were able to remain active either in their own business or moving into a different direction within the Bunzl ecosystem, which was something that we thought was a great opportunity for us. Since becoming part of Bunzl, we've really felt the support from the Bunzl leadership team to continue growing our team here at Monte. The ability to purchase globally has been a very big opportunity and advancement for us and to expand our vendor base and our product lines. A clear example of support was a couple of years ago when we got approval from the leadership team to build a brand new corporate office in our same area here in Riverside, Michigan.
We've been able to collaborate with a lot of the different Bunzl entities, whether it's Bunzl Distribution, Bunzl Processor, or Coolpack. Coolpack and Monte have a lot of customer layover. We have a lot of very similar products that we sell. Looking ahead, we've got some pretty big expansion and growth opportunities and objectives that we've set out for our team. We're going to continue to add value, and those things are very well supported by Bunzl.
My thanks to Alastair, Minna, and Sam for taking the time to make those videos and sharing their heartfelt thoughts on what selling to Bunzl is really like. That concludes the presentation stage of today's event. Before we move to Q&A, I'd like to introduce you to today's panel. We have Alberto, Oscar, who you will recognize from the first video, and joining them today is Nicholas. I'll let Nicholas introduce himself to you.
Thanks, Andrew. I'm Managing Director of Central and Eastern Europe. I've been at Bunzl for 14 years now, starting in the acquisitions team in Corporate Development, where I was involved in over 30 acquisitions. I then moved to South America, where I was responsible for the integration of a recent acquisition there. More recently, I'm in Central and Eastern Europe, overseeing and supporting a region in which Bunzl has been present for over 20 years. In that period, we've acquired more than six businesses, more recently in Poland a few years back.
Thank you, Nicholas. Before we open up to questions from the audience, I'd like to just get the team here warmed up a little bit. I'll throw a few questions at you, if that's all right, guys. Alberto, you've done 40 deals with us in your career at Bunzl. As a Business Area Head, how do you keep that pipeline active and full?
It is all about focus, consistency, and discipline. We basically know very well the markets in which we operate. We know our competitors. We know the relevant players. From my position, I empower local teams to engage with potential targets to build these trustful relationships. For the targets, think of Bunzl as a preferred option when they are ready to sell.
Thank you. How much of your time do you dedicate to M&A?
I would say that approximately 20% of my time is devoted to deal generation and supporting execution, reviewing IMs, discussing with Nicholas and my team the opportunities we have on the table, discussing with you and your team the strategic fit of some of these opportunities, and what is more important, visiting and meeting the targets. It is very important to meet them face to face to assess the quality of the management, to assess the cultural fit. I think it is crucial to look into the seller's size and ask yourself the question, can I work with these people for the next five, ten years? If the answer is no, no matter if the business is very good, I think we walk away.
Thank you, Alberto. Thank you, Oscar. You and I have worked together now for several years, and I'm sure people would love to hear how we think about scaling our model as Bunzl gets bigger. How do we keep that pipeline growing and maintain the impact that the acquisitions have had on the group over the recent years?
As you said before, acquisitions have had a significant impact on the group growth. Around two-thirds of the growth comes from acquisitions. I often say, as we get bigger, so our ground gets bigger. The more we grow, the more ground we have to cover. I think this is really easy to explain in two basic examples. The more like-minded ex-owners, good managers that join Bunzl, the more opportunities they bring to the table. Very recently, we did an acquisition in Mexico, for example, and the ex-owner, now the Managing Director of that business, three or four days after acquisitions, he was already calling me saying, "These are five targets that we should look into." More likely, some of them will be a very good fit for us. The more people we bring into the Bunzl family, the more opportunities or the more eyes we'll have to look for opportunities.
A second way that we do it as well is when we do a larger acquisition, something that sometimes we call a platform deal, that can result in opening new opportunities in new markets or in new sectors that we were not in before. A great example of this is when we did an acquisition in the MedTech space in 2021 in New Zealand. Since we acquired that company, we've blown three or four acquisitions in that region in that same space, and now we're looking to expand that same space into a place like Australia, which is relatively close by. Another great example of this is the MCR example that you gave, where we bought MCR, and then we've done very good bolt-ons into MCR that are complemented by the capabilities that MCR brought to Bunzl.
By that, what I'm trying to say is that the market is very fertile. The market is still very fragmented. While the market at some times might be cyclical, in the long term, we will continue to find very good opportunities that feel a bit well for us.
What are your reflections on our activity in 2025, and how do you feel things are shaping up as we move into the last quarter of the year and through into 2026?
2025 might seem that it was not a very active year compared to the previous years in terms of M&A transactions, and that is probably related to how the more global macroeconomic M&A market has been. Looking into 2026, I think it's very exciting and very promising. Certainly, we are looking at very interesting prospects. We've seen that sellers are beginning to get ready to transact, and we are ready when they are ready. I'm seeing 2026 with a lot of excitement and a lot of opportunities to come.
Good. Thank you. Nicholas, you started off working with me in your early years in Bunzl, 14 years ago. We were both in the Corporate Development department, and you've seen deals from the center, and you've seen deals from the region. How would you describe the relationship, and how does that relationship between central and local teams work, and how important really is that to our model?
That's right, Andrew. I've had the privilege of working in the London team and seeing the execution, and then also being with my local team originating. I think the origination is really where the local teams excel. We're constantly bringing deals up to you and your team in the head office. When it comes to the execution, myself and my local teams will take a step back whilst you're negotiating the contracts and getting very strong contracts in place for Bunzl. Back into the integration phase, once the contracts have been negotiated, it's back to us. We've got the ball, and we're bringing in the businesses so that they can thrive within our environment. Throughout all that, I have Andrea, who's a member of your team, who's very Romanian, by the way, so very focused and with a good knowledge of Central and Eastern Europe.
She's constantly being brought deals from her broker's contacts and Bunzl's broker contacts. As soon as she gets that, she's sharing it with me, and we're deciding together whether this particular acquisition would take a good step in the right direction for my region and Bunzl as a whole.
Right. Thank you.
It's a constant, constant conversation.
Do you ever feel any pressure from my team to actually do deals?
No, none whatsoever. The pressure is, and my responsibility is to grow my region and my P&L the most I can, and I'll be doing that mostly through organic growth. What do our customers need to grow and to thrive themselves? If an acquisition supports the customer and the customer proposition, we will absolutely pursue it.
Okay. Thank you, Nicholas. All right, I'll ask you now to forward to us and ask your questions. Please raise your hand before each question. Make sure you have your camera on, and please introduce yourself before asking the question. That would be very helpful to us, please.
We'll now go to the first question from David Brockton. If I could please ask you to turn on your camera and unmute yourself.
Hello. I'm hoping you can hear me. Can you hear me?
We can hear you, but we can't see.
Wonderful. Okay. Apologies. That's my.
We can't hear you anymore.
We can't hear you anymore, David. Perhaps we could leave, David, and move to another question.
We'll now go to Annelies. If you could unmute yourself and put yourself on camera.
Hi there. Can you hear me?
Yes, we can hear you.
Great. Perfect. Thank you. I have two questions, please. Sorry, Annelies Vermeulen from Morgan Stanley. Firstly, just coming back to some of the stats you gave, I think for Spain, where over the last six years, you'd made 22 offers, but only 10 of those had resulted in signings. I don't know if that's indicative for the rest of the business, but could you talk perhaps a little bit about the ones that weren't converted? Was it that you then ultimately decided to withdraw, or was it the seller? Why? Did they want more money? Was there a competing offer? Just talk a little bit about the ones that weren't converted. My second question was just on Nisbets. Any integration lessons you've learned from your largest acquisition to date? I appreciate it hasn't been entirely smooth sailing.
Are there any, has it changed the way how you think about large versus small deals and how you will allocate capital between those going forward? Thank you.
All right. There's a lot on there to unpack, but thank you very much for the question. I'll cover off and put a bit of detail around the Spanish stats, and then perhaps, Oscar, you could talk about the deals that might not have been converted. I think we've not done the work, but I think the Spanish stats are fairly indicative of our overall, and I do have a feel of probably about 50%, the 10 deals out of 22, probably about 50% is about the right percentage of deals that go through to conclusion. Bear in mind, some of those we will revisit later. Deals can get stuck in the mud for whatever reason, and they will come up again later. You've got to bear that in mind as well. Oscar, would you like to share some of the ones that might not have completed?
I'll come back to your Nisbets question.
Yes, absolutely. For example, there are situations that we go through a thorough DD process after we do the offer, and we continue to learn from the business and from the management team of the business throughout this DD process. Sometimes issues come up, and we are really sitting there understanding how these issues are addressed by the management team, by the seller's team, and that just helps us to continue to understand the business and how the managers manage their business better. Sometimes this results in us making a decision that is probably that that business is no longer the best fit. Inevitably, there's also the situation that we like the business, but it's not the right moment for that business for us to buy it. It is a cycle, and some businesses are growing and others are not.
We tend to try to find the right business at the right time from the right people. We have to continue to be disciplined, and that's how we are able to deliver that the 10 that we actually do perform to the highest standard.
Thank you, Oscar.
I think also at a local level, I think cultural fit is very important. If we're thinking of an acquisition to come in and one that we want to nurture for growth, cultural fit is very important, and that ability for the management team to come in with that Bunzl spirit, I think, is very important.
Yeah. Thanks, Nicholas. Just coming back to your Nisbets question, the first thing I would say is deals like Nisbets don't come around that often. We've been talking on and off with Nisbets and looking at them for 20 years. They were a big competitor to us. They are the market leader in the U.K. in catering equipment and possibly one of the biggest B2B distributors of catering equipment in Europe. They've got terrific own brands developed over many years. They are a strong player in the sector. What we found is that that product expertise has really helped us. We've delivered synergies already that are ahead of our initial expectations. The current performance is a little behind where we want it to be, but we're fully confident that we're going to claw that back, and we're going to achieve the original project WACC by year three or four.
We're fully behind the acquisition the way it's going.
Thank you.
Thank you.
We'll now go back to David Brockton.
Hello, David.
I'm lucky, hopefully. I will keep my camera off, if that's okay, just to avoid it crashing. Two questions, please. Firstly, are you able to provide an estimate of the typical costs and dues that you derive from acquisitions or the cross-sell benefits that subsequently occur? Secondly, do you see a discernible difference in transaction multiples between sectors, i.e. between cleaning and hygiene and safety and also food service? Thanks.
I'll cover off the multiple point and then hand over maybe to Nicholas and Alberto about the synergies there. They're more able to talk to what really gets delivered. On multiples, I think multiples, as I mentioned in the presentation, go through cycles. They very much depend upon activity. In most of our sectors, the multiples are relatively constant. I think the thing that really drives it is size and opportunity, the opportunity for it to grow in a market, and just the quality of the business, really, as much as anything. I don't perceive too much of a difference in multiples. The real big difference comes where you've got platform or large deals like Nisbet’s compared to those bolt-on opportunities. We really play in the area where you've got those small, medium-sized opportunities, those family-owned businesses where you can achieve multiples of 6x- 8x .
In terms of the synergies, we basically have three main synergies. One is purchasing synergies, which normally are immediate because we can realize that in the very short term. We have the revenue synergies that come down to the cross-selling opportunities, selling more to the existing customers. This normally takes a little bit more time. We have the cost synergies, which make sense when we fully integrate a small bolt-on acquisition. In the case of purchasing synergies, I think they are higher if we acquire a business in the sector and in the country we are in. It's case by case and varies a lot from one case to the other. We need to take into account as well what part of the synergies also help us to basically finance some resources, some support that we could potentially need to really land or onboard these acquisitions into the Bunzl family.
Perhaps, Nicholas, you could give a little bit more color.
Thanks, Alberto. I mean, David, from day one, a conversation, and even probably before that, a conversation with the selling MD is on how we can potentialize them. Alberto mentioned cost synergies. That's always the most obvious one and the quickest one. We have global suppliers who are often, because we're acquiring in similar segments, we have global suppliers who are also supplying the new acquisitions. That's where we're seeing the immediate benefit. Over time, obviously, we are looking also at the cross-selling. That takes time, partly because it takes time to get the product into the new customers, et cetera, and build out the customers in the other countries or in the other segments. That is a monthly conversation with the local management.
I think it is important to mention as well, we have a kind of process, a solid process to realize synergies. We call it POP, Purchasing Optimization Project, which basically puts in place a task force to realize synergies with suppliers to basically combine to look at for the lowest price of those companies.
We're very well rehearsed for that process.
Exactly. We can incentivize that team to make this happen as well.
Thank you. Thank you for the question, David.
We're now going to a question from Rory McKenzie.
Hi everyone. Hopefully you can hear and see me.
Yeah, we can hear you.
Perfect. Yeah, it's Rory McKenzie. I'm the analyst at UBS, and where coincidentally, I've also been following Bunzl for 14 years, but on the outside. Just to follow up on those synergies, how do you build in those synergies to your valuation framework that you're willing to pay, maybe especially in the context of now using more deferred and contingent consideration for your joining companies? I guess we deal in a very sanitized world of adjusted EBITDA numbers, which isn't always the kind of metric that maybe companies look at internally. Can you talk about how you match that process with them?
Secondly, maybe going against synergies, do you ever find that any of the companies that you're looking at are maybe really great in the areas that you like, but maybe they've got some adjacent areas that don't quite fit with your five-point template as to where you want to be, and how would you manage that kind of portfolio issues in those acquired companies?
Okay. On the first point, I would like to ask Oscar Gonzalez to respond a little bit on that. Beforehand, I would just like to say we are very cautious in our measurement of pre-acquisition synergies. We have our template, we have experience, but we're very cautious about how we factor those into any form of valuation. Perhaps you'd like to tell us a little bit more, Oscar.
Sure. Of course, we're very disciplined in our evaluation approach. We try to avoid the trap of just falling into an Excel and putting a number of synergies that then they need to get realized. Our experience with the many deals we've done is that it's difficult to actually realize all the synergies that you put into an Excel model. We're disciplined from that approach. We also never forget that we also bring investment into the business. We buy businesses in order to keep them and hold them long term. From the very early beginnings, we need to bring some investment into that business. Of course, that cost is more than offset with the growth and the synergies we bring in, but it's also something to keep into account.
When you're talking about our minorities and that we have partnerships, in those partnerships, I think we are happy to pay for the synergies that the seller or the shareholder has delivered and is bringing to the table. We're happy to share those because we've kept most of those synergies by owning the majority of that business. If they are realized and they have been brought to the table by them, we can share some of the upside.
Thank you, Oscar. I'll address a little bit your question on where an acquisition may come with adjacencies that we don't necessarily think will fit. Maybe Alberto or Nicholas, you can think of some examples where we've experienced that. That does happen, and I think it is a case-by-case basis for us to assess what the risk is around those areas that might not be a perfect fit for us. It's difficult to really speculate, but it is a case-by-case basis. You find that acquisition opportunities specialize in what they do, and they're very good at what they do, and we buy good businesses. I can give you one really good example of where an adjacency has worked. The acquisition of Greenham, where I joined through Bunzl, Bunzl bought Greenham because it was the biggest cleaning and hygiene competitor in the UK market. Safety was an adjacency.
That's a great example of where an adjacency really can actually bring value to the business if it's treated in the right way. I don't know if you've got any more recent examples.
Yeah, I think probably one example of an adjacency for that business, but not an adjacency for Bunzl, was Techno Packing, perhaps. Techno Packing represents an industrial packaging business where the food service packaging was a minor part of the deal. Today, it represents more than 50%. We have been growing that thanks to the knowledge we had in the food service packaging sector in Spain.
Yeah, I think it's not as black and white as whether it's an adjacency, therefore we've got to take it out. I think we're always learning from new acquisitions, and businesses are bringing in new ideas on how to enhance the touch points they're having with their customers. If a business is maybe not exactly what we do, maybe we'll learn from that and adjust it so that it matches, let's say, our working capital requirements or our service requirements.
Yeah. We could call adjacency as well to this converting or to this light manufacturing. We denominate this type of things. For example, a business that has 10% of the business, a couple of machines, where they basically customize packaging rolls. This type of business is an adjacency, but it creates a lot of value over time. We are happy with this type of adjacencies.
Yeah, just to finish that off, just to reassure you, we don't stray too far from the core. That is where our strength is.
Yeah, great. Thank you.
Thank you for the question, Rory. Next question?
Just to remind everybody, if anyone's got a question, please do raise your hand. We have had a couple submitted in advance by email. To pick up the first of those, to go back to culture, how long do management teams typically stay with the business, and how do you ensure they become part of the Bunzl DNA in such a decentralized group?
Okay. I will defer to Nicholas and Alberto on that. Beforehand, I'll quote one statistic to you that came across my desk just recently. Over the last five years, we've completed a very large number of deals, and the number of sellers within those deals that still are with us today is 80. Eighty sellers are still with us. Some of those transactions might have had two or three sellers and some one, but that's quite a compelling statistic as to how people stick with us and stay with us. Over to.
No, the time sellers normally stay in the business varies from three years, which is basically what we normally have them as a retention, up to 25 years, as we have seen in the video of Alastair. We have in Europe some examples of Jos in the Netherlands; it's been 17 years, or Hans, it's been 11 years, or Juan Pedro sold his business back in 2010 and officially retired last year, despite the fact that he's still advising us and engaged with us. That's about it.
A range of basically time where they spend with us. In terms of how we can, we like to talk about onboarding rather than integration. The way we onboard people, we onboard new employees is through strong communication from day one. Perhaps you, Nicholas, can describe some examples of how we do that.
Yeah. I mean, that's right. I mean, from day one, myself and my team are going into the newly acquired business to explain what it is to be at Bunzl, who we are. I think something that we shouldn't forget is that we are, to the core, a highly decentralized business. Where we are good as managers is keeping true to that and recognizing that the businesses that we're acquiring are highly entrepreneurial. We're bringing these guys in, communicating, of course, the key points that make us Bunzl, but also being very, very respectful and trying to make sure that they grow and continue to grow in a way that they have done so in the past.
One important point is we offer them, we offer the employees a kind of suite of talent development programs, from local trainings to the Senior Leadership Program, which is a global program for senior executives. They have the opportunity to grow within Bunzl. We have many examples, and one example is Frank . He came with the business and now is CEO. The possibilities are infinite for employees joining Bunzl.
As we saw in the video earlier, you know, we're bringing in our EHS standards. We have very good digital know-how. Alberto's team is top of the market in terms of IT knowledge, et cetera, and in day one.
Wow. Thank you.
Thank you for the question.
Now going to go to a question from Bastien Bernard. If I could remind you to switch on your camera. Thank you.
Yes, good afternoon, gentlemen. Thank you for the insight. I have a question regarding your IT systems. When you make all these acquisitions, how do you onboard the different companies? How easy is it to onboard, and usually, how long does it take? Not only the warehouse management system, but also the ERP, the CRM, et cetera, please.
Yeah, good question, Bastian. You know, it's a question that I get asked a lot. I'll hand it over shortly to Alberto, but it's a question I get asked a lot by sellers. You know, their ERPs and their IT systems are often quite dear to them. The thought of changing an ERP can fill a seller with dread. I'll let Alberto explain.
In continental Europe, we have almost 40 different ERPs. That gives you a flavor of the complexity in terms of ERP, which, by the way, are not so relevant. We have created an architecture so we can collect data, we can upload the relevant data we need, basically, from the business in a very easy way. I think the systems are not constrained, are not a limitation, and we can easily onboard this business with the relevant data we need from them.
The one thing that we actually do look at during due diligence is around cybersecurity. We do our own cybersecurity assessment during the due diligence process, and we make sure that the businesses that we buy are cybersecurity protected from day one after acquisition. That is one piece of the learnings during the process that we hand over to the operating management team. Yeah. Good point, Oscar. Just to elaborate a little bit on what Alberto said, it's not the ERP that's really important to bring benefit to a business. We're trying to enhance a business by putting in things like warehouse management systems, et cetera. These can sit around a different ERP. We can have more ERPs, but we will try and focus and deliver benefit through things like warehouse management or CRM systems. That doesn't mean, Andrew, that we, from day one, we're reporting.
We have a reporting tool, HFN, which means that week one, we're already reporting sales through the internal system. Yep. By the end of the month, absolutely to normal to Bunzl standards, we're reporting a full P&L and balance sheet. It's a bit of a complex answer to your question, Bastian, but hopefully you have a clearer picture now.
I hope your system is not as complex.
Thank you.
If anybody else has any questions, please do raise your hand. Otherwise, we've had another question that's been submitted via email. I'll just ask that question of the team. The question is on the theme of integration and the type of investments you make in a business when it comes into the group.
Okay, who would like to have a bit of input to that?
As I mentioned before, we onboard. We don't really integrate new businesses. There are three elements that we basically, we could say, impose. One is financial reporting. The second is cybersecurity, as Oscar mentioned. The third is health and safety, right? We basically invest or help the seller to invest in these key areas for us.
Yeah.
Right.
Generally, we're a low, low capital expenditure business, aren't we?
We are a low capitalization.
Occasionally, we may need to invest in a bit of racking or whatever, but generally.
Yeah. We normally, health and safety, we normally have higher standards in Bunzl than the local legislation. This is an area where we factor that area in the due diligence before because we assess that. This is an area where we put some investments, and if necessary, also in IT, cybersecurity, specifically in the cybersecurity side.
Yeah. In the end, it's case-by-case basis. As we do due diligence, we learn more about the business. Sometimes we learn that they need some extra support in the finance team or some extra support in the reporting side. Throughout the due diligence process, we already factor in that we need to give some extra support there. I'd say that's the most common investment, is always in the Financial Controller or a Financial Director to ensure that we're getting the reports in and the standards that Alberto is talking about. It's a bundle bridge for us. Okay. Thank you. Thank you for the question.
We'll now go to a question from [Katriana Hall].
Hi there.
Hello.
Hi, thanks for the presentation. I'm from Navera. We are shareholders. I was wondering if all the approaches you have discussed today, can we assume that those apply across the entire global footprint of Bunzl? I guess I'm particularly thinking about the U.S. business, your largest business, and how you manage the challenges around time difference from having your team in the U.K. versus the U.S., and whether the members of your team that are responsible for the U.S. have been with Bunzl for the sort of length of time that the team is presenting to us today, or whether you've seen more turnover there, please.
Yeah, I'll cover that off. I think the strength of the team in the U.S. is great. I have two members of my team who are dedicated to North America. We have a CEO in North America who plays a very active role in M&A as well. Jim McCool's been with us a long time. He was previously the CFO, and he really enjoys getting involved in M&A, both with sourcing opportunities and at times likes to have his input in terms of the transaction process as well. Plus, we have a current CFO out there, Katie, who previously was in an MD role in Central and Eastern Europe and has a long history. I think Katie's probably been with us, I don't know, 10, 20 years. So we've got great experience in the team there.
From my team, it's a guy called Will who heads up the approach in North America. He's been with Bunzl for, I think, around 12 years, and the approach is very similar to the rest of the world. You know, we look to work very closely with the management teams in North America. Will is actually over there at the moment. The time difference is no real barrier. I mean, the time difference in the U.S. is probably easier than us working with our colleagues in Australia. We have to do that. Will's got some great relationships locally. We have a guy in North America who's been there for a long time. He's a real dealmaker for us, a guy called Joe Wilde. He has his little black book. He has all the contacts.
He has all the relationships with potential sellers, and that consistency over time, and he's given that consistent message of what sellers feel like after joining Bunzl because he was once a seller. We are very active. We have a consistent approach both in North America and Continental Europe.
Thank you.
I think, sorry, I was going to add because you mentioned the time difference and that we are indeed a London-based team from the corporate development side, but we also do spend a lot of time traveling, visiting the businesses locally, and partnering with the local MDs. In my personal situation, smaller country, North America, but I do go a lot to Mexico, spend a lot of time in Mexico with a leadership team from Bunzl there, trying to develop and get to know the market better. In the same way, I'm in Spain most of the year. I mean, I'm in South America as well. Every member of our team spends a lot of time on ground in the specific region, knowing and learning the opportunities in there.
Next question will be from Sanjay Vidyarthi.
From Panmure Liberum. Just a question on strategic oversight as opposed to financial oversight. Given the decentralized model, how can you spot a misstep, say, on product innovation or something like that before it comes to doing the numbers? What are the controls and processes in place to spot that?
I think I'll start with how we review our acquisition performance at the center. Then I'll let the team talk about how that works locally as well. We have a very robust approval process for all of our acquisitions. You'll have heard in my presentation about the role of the Executive Committee. The Executive Committee in Bunzl consists of Frank, the CEO, Richard, CFO, myself, the HR Director, and the GC. We will sit down every two weeks and look at potential acquisitions, looking at them from an operational and quality perspective, and looking at them through the strategic lens of where we feel we need to invest. We have great oversight centrally in what we're doing from an M&A perspective. Locally, we have wonderful experts like Mitch, who's the leader in MCR, and Beth, who runs our safety businesses in North America.
They have great oversight with their local markets and bring forward to us great businesses. In terms of a misstep, we present back to the board every two years. My control is going back to the board every year on the acquisitions that I completed two years ago and present those back to the board, explaining the performance of those businesses. That's the backstop. Obviously, we're looking at businesses day in, day out once that deal has been completed. It was more the day-to-day side of things that I was asking about in terms of if a business is actually kind of going down a direction once you've acquired it that may ultimately not be the right one.
We basically monitor very closely the financial KPIs, the P&L, and return on capital, in my case, on a monthly basis with Nicholas and my team. We do a quarterly review with Frank and Richard. We have two touchpoints in the budget process, the strat plan process. We basically, and Nicholas is doing this on a daily basis, can spot early on whether a business is underperforming according to the acquisition case or not. We can put in place an action plan to basically put them on track. We have a robust system to monitor the business on a daily basis. Probably you can end it.
It's my responsibility as Regional MD, as well as my colleague, my peer Regional MDs, to have that relationship with the business on a daily level. I will be personally having formal weekly meetings with each of them. The MDs in each of those businesses will be talking to me regularly, probably daily, if not several times a week. It's my responsibility to create, as a manager, that reporting line with them. Right. Don't forget our scale. I mean, we, you know, there's four of us here today, but there's 100 business managers out there throughout the world who are very close by, who keep a monitor on new acquisitions, who are there to provide support. Yeah. We do have that scale that we can manage these acquisitions very quickly if things start to drift slightly. Obviously, these are conversations based on tools. We have KPIs.
We've got data from weekly sales to monthly operating KPIs. These are things that will drive a conversation. You'll spot it very quickly if things are going awry. Yeah. Most of what we acquire, the teams have been in place for a long time. These are mature managers. Often, the family sellers have been in the business for many, many years. These are acquisitions. They're not going to go off the tracks. Yeah. They're doing what they're doing, and that's why we're buying them because they're good quality businesses. Mm-hmm. I think one great thing about that we execute in-house the deals as well is that the person that actually did the deal, obviously, we give it over and the responsibility passes to the business area, but the person that managed the deal and the due diligence is still within Bunzl, is still a partner of everyone here.
If there's anything that we need to pay closer attention to, we're there. We're constantly, constantly, constantly speaking to the entrepreneurs. It's just a continuity post-deal that is available for us given that we execute the deals in-house. Yeah. All right. Hopefully that answers your question, Sanjay.
Yes, it has. Thank you.
Thank you.
Thank you. That concludes our Q&A session. I will hand back to Andrew for closing comments.
Okay. It really just remains for me to say thank you all for attending. I hope you've enjoyed today's session and it's given you a sense of the opportunity and the capabilities of Bunzl. We have a great acquisition pipeline and a great acquisition machine. We've got a well-established discipline process, and we fully expect to continue to play a fundamental part in the growth of Bunzl going forward. Thank you for listening.